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We entered into a colocation agreement in 2012, and were provided (and signed) nothing other than a Service Order which outlined the services and their costs. There have been 3 power outages since then, each of which has resulted in the destruction of equipment owned by us. Our service term expires March 2014. We requested contract termination with cause, effective December 1. The service provider responded that we do not have cause, and are subject to the "termination without cause" clauses of their Master Service Agreement (which we have never seen, and certainly did not sign), and is demanding an early termination fee of $7,800 (which is equal to the remaining balance of the service term from December 1 though March 1). We feel that the continual power issues and failure to resolve them, which have directly resulted in loss of equipment (approximately $1,400), is sufficient grounds for termination with cause.
Colocation refers to computer hardware (in this case: servers) being housed in a facility operated by a service provider.
The service order simply lists the amount of electricity, bandwidth, and physical space they are to provide, as well as the length of the contract.
We do not have a copy of the Master Services Agreement they are citing as example (we have never seen it).
The Service Provider is in USA, and we are in Sweden.
Below, find a copy of what we were provided when we requested termination of our contract.
Thank you for contacting [redacted]. This is confirmation of receipt regarding your request to terminate colocation services at [redacted] prior to the expiration of the term of your contract . Below, I have included section 10.3 of our Master Services Agreement, which outlines the terms under which early termination of your services will be handled:
10.3 Termination without cause. Customer may, at their discretion, elect to terminate this agreement without cause at any time by providing written notice to the [redacted] billing department a minimum of thirty (30) days prior to the expiration or automatic renewal of this agreement. Early termination of this agreement is subject to payment of an early termination penalty as follows:
(a) If less than three (3) months remain prior to the next renewal term as outlined in Section 2.2, customer agrees to pay an early termination penalty equal to the remaining monthly recurring charges as outlined on the relevant Service Order;
(b) If greater than three (3) but less than six (6) months remain prior to the next renewal term as outlined in Section 2.2, customer agrees to pay an early termination penalty equal to 3 times the regular monthly recurring charges as outlined on the relevant Service Order;
(c) If greater than six (6) months remain prior to the next renewal term as outlined in Section 2.2, customer agrees to pay an early termination penalty equal to 50% of the remaining monthly recurring charges as outlined on the relevant Service Order;
All early termination penalty charges will become due and payable immediately upon acknowledgement of Customer’s early termination request by [redacted]. [redacted] may, at their sole discretion, require customer to execute a Settlement Agreement, Non-Disparagement Agreement and Mutual Release of Claims prior as a condition of accepting Customer’s early termination request.
Based on the terms above, the total amount of your early termination penalty would be as follows:
Effective Termination Date: November 30, 2013
Early Termination Penalty: $7800.00
If you have any questions regarding this matter, please contact us. If you would like to proceed with early termination of your agreement, please confirm the effective date for termination, and we will start drawing up the appropriate forms.
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